Addressing Tail Risk within FRTB

Clive Corcoran

"In this whitepaper, I want to examine some pivotal concepts that are provided in the risk calculation methodology within the FRTB documentation provided by the Basel Committee on Banking Supervision (BCBS).

One of the major purposes in bringing forward the FRTB requirements was for the BCBS to address tail risk in financial markets, a key omission in the Basel II framework.

To get a better handle on how FRTB is deigned to tackle this task we need to examine and elucidate the specific terminology that the BCBS uses."